GOLD FUTURES

A Gold Futures Contract is defined as a standardized contract to buy or sell gold in the future, with the amount, quality, type, and the settlement time and location determined at the time of transaction. Some of the organized markets for gold futures trading are the New York Mercantile Exchange (NYMEX), TOCOM in Tokyo, Chicago Board of Trade (CBOT), and Jakarta Futures Exchange (JFX).

Traditionally, gold trading was concluded with the physical delivery of the gold. However, in actual practice, this process became tedious and impractical especially when disagreements arose over factors such as price, quality, cost of clearing, storage, and tax. To resolve these issues and facilitate the process of gold transactions, some exchanges developed Gold Futures Trading (i.e., also called “Futures for Physical”), which combines both spot and futures transactions. This type of transaction allowed buyers and sellers to settle the trade with pre-established specifications and with the settlement guarantees by both parties.

In practice, most investors do not require the physical delivery of the commodity. Many are content to simply derive their profits from the price movements. To facilitate this purpose, the exchanges also allows cash settlement for gold futures.

Contract Specifications for Gold Futures Contract: